The Enforcement Directorate (ED) has made a major breakthrough in the OctaFX Ponzi scam case by arresting Spanish “mastermind” Pavel Prozorov in his own country.
On Friday, an interim order was issued under the Prevention of Money Laundering Act (PMLA) to attach cryptocurrencies worth ₹2,385 crore in connection with the case.
What are the allegations against the company?
According to the ED, OctaFX “systematically defrauded” Indian investors ₹1,875 crore from July 2022 to April 2023. This helped the company, which operated in multiple countries, generate illegal profits ₹800 million crowns.
“OctaFX presented itself as an online forex trading platform for currency, commodity and cryptocurrency trading without RBI permission…Initial investors were given small profits to build confidence as generally seen in a typical Ponzi scheme,” the ED said, according to PTI.
An investigation by the ED revealed that the company had a “distributed global network” that was designed to “evade” regulatory scrutiny while raising illicit funds.
Most of the company’s marketing activities were handled by contracted entities in the British Virgin Islands. Their servers and back-office operations were located in Spain, payment gateways were operated by entities in Estonia, while some in Georgia helped with technical support. The “holding” company of the Indian entity was domiciled in Cyprus.
The ED also said there were entities in Dubai overseeing Indian operations, while some Russians based outside Singapore were involved in exporting bogus services to funds that launder money abroad.
How was the fraud carried out?
OctaFX collected funds from investors through UPI and local bank transfers, which were then routed through shell entities and individual accounts and layered across multiple mule accounts.
These layered funds were then sent abroad as payments for bogus software imports as well as research and development services.
The mastermind of the whole operation, Pavel Prozorov, controls several entities in Spain, Russia, Estonia, Hong Kong, the United Arab Emirates, Singapore and Great Britain that would receive these payments. Moreover, part of the laundered funds would later be returned to India as foreign direct investment (FDI), according to the central agency.
The ED has currently filed two charge-sheets against 55 entities in a special PMLA court.
Property worth around ₹ED attached 2,681 million crowns in the case. This also includes 19 properties and a luxury yacht in Spain owned by Prozorov.
